U.S. Existing Home Sales Unexpectedly Drop 1.0% In December

1/22/2013 10:36 AM ET

Existing home sales in the U.S. unexpectedly decreased in the month of December, according to a report released by the National Association of Realtors on Tuesday, although the total sales for 2012 still reached a five-year high.

NAR said existing home sales fell 1.0 percent to a seasonally adjusted annual rate of 4.94 million in December from a downwardly revised 4.99 million in November.

The drop in sales came as a surprise to economist, who had expected existing home sales to edge up to an annual rate of 5.10 million in December from the 5.04 million originally reported for the previous month.

Despite the monthly decrease, NAR said the preliminary annual total for existing home sales in 2012 was 4.65 million, up 9.2 percent from 2011. The total sales figure for 2012 is the highest since 2007.

Lawrence Yun, NAR chief economist, said, "The number of potential buyers who stayed on the sidelines accumulated during the recession, but they started entering the market early last year as their financial ability and confidence steadily grew, along with home prices."

"Likely job creation and household formation will continue to fuel that growth. Both sales and prices will again be higher in 2013," he added.

The report also showed that housing inventory fell 8.5 percent to 1.82 million existing homes available for sale at the end of December.

The current housing inventory represents 4.4 months of supply at the current sales pace, down from 4.8 months in November. The months of supply is at the lowest level since May of 2005.

NAR said the median price for existing homes was $180,800 in December, up 0.8 percent from November and up 11.5 percent compared to the same month a year ago.

For all of 2012, the preliminary median existing home price was $176,600, up 6.3 percent from $166,100 in 2011. The increase represents the strongest growth since 2005.

The report also showed that single-family home sales fell 1.4 percent to an annual rate of 4.35 million in December, while existing condominium and co-op sales rose 1.7 percent to an annual rate of 590,000.

Existing home sales in the Midwest tumbled by 5.9 percent, while sales in the South fell by 3.0 percent. On the other hand, sales in the West and Northeast rose by 5.1 percent and 3.2 percent, respectively.

NAR President Gary Thomas said, "Although tight inventory is limiting home sales in many areas, overall sales are expected to stay on an upward trend."

"The biggest impact of tight inventory is upward pressure on home prices, but after values fell below replacement construction costs, prices are still affordable in most of the country," he added.

Friday morning, the Commerce Department is scheduled to release a separate report on new home sales in the month of December. Economists expect new home sales to climb to an annual rate of 388,000.